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Regulation and administered contracts revisited: Lessons from transaction-cost economics for public utility regulation

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Abstract

This article reexamines the administered contracts approach to regulation in light of recent empirical research that establishes the importance of transaction-costs in the organizational choice and design decisions. After reviewing the fundamentals of transaction cost reasoning and the franchise bidding-versus-regulation debate, the study surveys the empirical literature on franchise bidding, contracting, and vertical integration. The implications of transaction-cost theories for current policies toward pubic utility regulation and deregulation are also addressed.

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Authors and Affiliations

  1. Department of Economics, The Pennsylvania State University, 16802, University Park, PA, USA

    Keith J. Crocker

  2. University of Michigan School of Business Administration, 48109, Ann Arbor, MI, USA

    Scott E. Masten

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  1. Keith J. Crocker
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  2. Scott E. Masten
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We would like to thank Michael Crew, Victor Goldberg, Mark Lowry, Claude Menard, and Roger Sherman for helpful comments.

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Crocker, K.J., Masten, S.E. Regulation and administered contracts revisited: Lessons from transaction-cost economics for public utility regulation. J Regul Econ 9, 5–39 (1996). https://doi.org/10.1007/BF00134817

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